What is a loan that does not meet Fannie Mae or Freddie Mac's underwriting guidelines called?

A loan that does not meet Fannie Mae or Freddie Mac's underwriting guidelines is called a non-conforming loan. Fannie Mae and Freddie Mac have specific criteria regarding loan amount, creditworthiness, loan-to-value ratios, and other underwriting standards. If a loan exceeds these criteria, it is classified as non-conforming.

Non-conforming loans can include jumbo loans, which exceed conforming loan limits set by the Federal Housing Finance Agency (FHFA), as well as loans granted to borrowers with credit profiles that do not meet the guidelines established by these governmental-sponsored enterprises (GSEs). These loans often have different qualities, such as higher interest rates and larger down payments, due to the increased risk associated with them since they cannot be sold to Fannie Mae or Freddie Mac in the secondary market.

In contrast, conforming loans adhere to all criteria set by Fannie Mae or Freddie Mac, ensuring that they can be packaged and sold in the secondary market, facilitating greater liquidity for lenders. Alternative loans often refer to niche types of lending products that cater to specific borrower needs but do not directly relate to Fannie Mae or Freddie Mac guidelines. Non-complying is not a standard industry term used to describe loan classifications. Thus, identifying a non-conforming